Today’s economy demands that CFOs treat spending as a source of competitive advantage, not just a cost to be minimized.
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As cost pressures mount, CFOs must reposition spending to drive value
Gartner polls of CFOs and business executives signal cost cutting ahead for most organizations as costs threaten to keep rising while revenue growth slows.
But our research suggests there is a proven path forward for those who adopt a disciplined, value-driven approach to cost management — optimizing costs to sustain competitiveness and fuel growth. This requires a systematic approach to:
Reduce unnecessary spend
Optimize enterprisewide performance
Reinvest in high-value capabilities
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Cost management in 2025 means spending must flex to protect current and future drivers of value
History shows that how CFOs reposition spending to respond to growing margin pressure determines how effective their organization is in the long term.
Efficient growth companies excel where others falter
Gartner’s analysis of what we call “efficient growth” companies has shown time and again that some organizations manage to achieve long-term, sustainable top-line growth across economic cycles while continuously improving their margins.
This has proven out across numerous economic shocks, wherein efficient growth companies simultaneously achieve revenue growth, cost management and margin expansion to outperform peers. Key to their success is how they approach strategic cost management:
They treat spending on differentiated capabilities as a source of advantage, not an expense to be minimized.
They consistently reallocate resources toward growth-driving activities.
They maintain tight cost discipline without sacrificing innovation or agility.
They embed cost consciousness deep into decision making.
Gartner captures this disciplined behavior in its cost optimization approach.
Ask Gartner about the CFO Accelerator: an off-the-shelf toolkit for end-to-end management of your cost optimization program.
4 steps for building and executing your 2025 cost management strategy
A step-by-step approach will help CFOs build a cost optimization strategy with clear objectives and specific, measurable goals that will capture buy-in and deliver value.
Step 1: Organize your cost management strategy
Establish clear lines of accountability and ownership for developing the cost management strategy.
Guide your executive team through a structured dialogue to clarify critical elements of the organization’s cost management strategy.
Collect data on peer cost structures to size the cost reduction opportunities and areas of focus.
Step 2: Engage individual budget owners to identify cost reduction opportunities
Work with budget owners to identify opportunities to reduce cost without compromising business performance.
Identify activities to eliminate, and provide budget owners with a scoring template to help them identify what to maintain or eliminate.
Help budget owners uncover cost management opportunities beyond headcount and activity elimination.
Step 3: Identify initiatives that will further streamline, reduce or eliminate work across the organization
Build a portfolio of cost management initiatives that will achieve structural and lasting shifts in the organization’s cost base.
Size the cost reduction potential of organizational restructuring. Use clear criteria to identify opportunities for outsourcing and centralization initiatives to reduce costs.
Look for process improvements that could save costs through elimination, automation or standardization.
Solicit cost-saving ideas from across the organization.
Assess the risks and benefits of cost reduction proposals strategically.
Prioritize a final list of your best ideas based on ease of implementation, estimated financial impact, time to realize cost savings, and compliance and operational risks.
Step 4: Execute on the cost management strategy
Clarify the proposed cost reductions and the new organizational design structure, and build a roadmap to guide ongoing cost management efforts.
Share with organizational leaders proposals for:
Cost reductions, including the timeline to realize savings, risks associated with the reductions, and estimated benefits
Job eliminations, including the rationale and how it will change the scope of activities going forward
Map your prioritized cost management initiatives, including timelines, on a roadmap to guide the ongoing execution of the cost management strategy.
Review and enforce accountability for progress. Have initiative sponsors provide regular summaries of progress against milestones to facilitate oversight.
For more on balancing immediate pressures with long-term strategic objectives, fostering a cost-conscious culture and embracing innovation to drive future success, join the complimentary webinar: Executing in a Volatile Economy — Cost Optimization and Operational Flexibility.
Cost management FAQs
What are the key aspects of cost management?
Key aspects of cost management include reducing unnecessary spending, optimizing enterprisewide performance and reinvesting in high-value capabilities. A successful cost management plan involves treating spending on differentiated capabilities as an advantage, reallocating resources toward growth-driving activities, maintaining tight cost discipline while fostering innovation, and embedding cost consciousness into decision making.
What are the benefits of effective cost management?
Effective cost management offers several benefits, including sustainable top-line growth and improved margins across economic cycles. It allows organizations to reallocate resources toward activities that drive growth via cost-saving initiatives. By maintaining tight cost discipline without sacrificing innovation or agility, organizations can achieve revenue growth, margin expansion and outperform peers.
What are the essential tools for CFOs in cost management?
Essential cost management tools for CFOs include a structured cost optimization strategy with clear objectives and measurable goals. This involves establishing accountability, engaging budget owners to identify cost reduction opportunities and building a portfolio of initiatives for structural cost shifts. Tools also include criteria for outsourcing, centralization and process improvements like automation and standardization. A roadmap for executing cost management strategies, along with regular progress reviews and accountability enforcement, is crucial.
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